The correct option is 2 only.
Explanation
A Centrally Planned Economy (also known as a Command Economy or Socialist Economy) is an economic system where the state or a central authority makes the key decisions regarding the production, distribution, and consumption of goods and services.
Statement 1 is Incorrect: In a centrally planned economy, the government is the primary producer of goods and services. It typically owns the factors of production (land, capital, and natural resources) and actively engages in production. The prohibition of government production is a characteristic of extreme laissez-faire capitalism (in theory), not a planned economy.
Statement 2 is Correct: The fundamental principle of a centrally planned economy is that the government intervenes to allocate resources in a way that is considered socially desirable. Unlike a market economy, where allocation is driven by the price mechanism and profit motive, a planned economy focuses on social welfare and the equitable distribution of resources as determined by the central planning authority.
Key Takeaway: In a centrally planned economy, the market mechanism is replaced by central planning, where the government owns the means of production and directs resource allocation to achieve specific social goals.